High North Resources-Operations Update on Core Area, Blocks A to H
23 July 2014 - 10:30PM
Marketwired Canada
NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE
UNITED STATES.
High North Resources Ltd. (TSX VENTURE:HN) (the "Company" or "High North") is
pleased to provide a general corporate and operational update.
Summary
High North is pleased to announce Montney oil flowing production rates from the
five horizontal wells drilled to-date on its 100 percent owned core area 20.25
contiguous sections (Blocks A to H) at the Girouxville-Mclean property.
Since bringing on the Company's first well in mid-January 2014 to the end of
May, 2014, over 40,700 barrels of oil ("bbls") or over 54,600 barrels of oil
equivalent ("boe"), including associated gas have been produced. Five out the
five 100% working interest wells flowed oil during test periods. The two wells
currently on production (09-02-76-21W5M, 16-02-76-21W5M) on section 02-76-21W5M,
and wells 08-21-76-21W5M, 08-02-76-21W5M, 16-02-76-21W5M meet or exceed
management's Montney oil type curve. A work over at 09-26-75-21W5M is planned to
increase productivity after larger surface equipment is installed.
Due to undersized surface equipment bottlenecks, the initial flowing production
rates ("IP") in the following table reflect restricted rates. Larger sized
equipment is currently being installed and is expected to be completed by
mid-August, 2014. In management's opinion this increase in productivity will
enable the wells to pay out between one year and one and a half years. The cost
to-date of drilling and completion is on average $2.5 million per well.
Drilling Update
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Wells Flowing Montney Oil Production Rates (bbls/d)
----------------------------------------------------------------------------
Completion(1)
Presented from Completion Test Test Period
North to South IP (30 days) IP (90 days) IP (days)
----------------------------------------------------------------------------
08-21-76-21W5M Anticipate N/A 86 5
being on-stream
late August,
2014
----------------------------------------------------------------------------
16-02-76-21W5M 229 218 159 7
----------------------------------------------------------------------------
09-02-76-21W5M 160 141 67 18
----------------------------------------------------------------------------
08-02-76-21W5M Anticipate N/A 130 7
being on-stream
late July, 2014
----------------------------------------------------------------------------
09-26-75-21W5M 47 27 50 2
----------------------------------------------------------------------------
Note: (1) Completion test period from first oil produced.
The Alberta Energy Regulator (the "AER") has granted approval to flare a total
of 781 thousand cubic feet per day ("Mcf/d") on the associated gas production
from section 02-76-21W5M wells until the end of April, 2015. Currently, a total
of 415 Mcf/d or 53% is flared from 16-02-76-21W5M and 09-02-76-21W5M and
approximately 200 Mcf/d from 09-26-75-21W5M. The associated gas flaring will be
minimal until major facilities such as a gas plant and gas sales line are
installed. The Company has filed an application with the AER to flare natural
gas from 09-26-75-21W5M and 08-21-76-21W5M along with future drills until gas
and natural gas liquids ("NGLs") conservation is finalized and executed.
In addition to the three wells currently producing oil, the Company has
de-risked the 20.25 contiguous sections by drilling two Montney horizontal
step-out wells at 08-21-76-21W5M and 09-26-75-21W5M. The 09-26-75-21W5M well is
23 metres structurally lower than the 09-02-76-21W5M well and is producing oil,
while 08-21-76-21W5M is 12 metres structurally higher than 09-02-76-21W5M.
Moreover, it appears that net pay in the well exceeds 30 metres. This discovery
proves highly encouraging to the prospectivity of much of the 20.25 contiguous
sections (Blocks A to H) in that most of the Blocks A to H sections are
structurally updip of the 09-26-75-21W5M well. Oil production from these wells
extends the Company's Montney oil pool to the South-West and North-West. At
current spacing of four horizontal Montney oil wells per section, it is possible
with continued success to drill a minimum of 80 wells on the Company's core area
20.25 contiguous sections (Blocks A to H). Further down spacing to eight wells
per section completed in the offsetting section 01-76-21W5M acreage suggests
that the Company may be able to drill additional infill locations in order to
effectively recover a greater percentage of the oil-in-place.
Colin Soares, the Company's President and Chief Executive Officer stated:
"Progress to date on High North's Girouxville-Maclean property has been very
encouraging and the Company looks forward to achieving optimized production
rates in addition to increasing production through the near-term addition of
another four wells. With each well, we are learning more about the Montney zone
drilling and completion complexities, and are improving on our techniques and
capital efficiencies. The Company's step-out drills together with competitor
offset drills are helping High North de-risk the play and we continue to define
and determine the significance of what resides on the 20.25 contiguous sections
(Blocks A to H) that High North has earned to-date."
Future Drilling
For the remainder of 2014, the Company intends to drill four additional wells to
further de-risk the Company's core area 20.25 contiguous sections (Blocks A to
H). The Company expects to spud the first well in early September 2014.
Reserves
The Company intends to update its reserve report in September, 2014 through its
third-party evaluator, GLJ Petroleum Consultants and has initiated a geological
assessment on the recently drilled 08-21-76-21W5M.
Surface Equipment
The Company is constructing a multi-well battery with larger capacity surface
equipment to allow for production optimization from the 16-02, 09-02 and
08-02-76-21W5M. Larger surface equipment has also been ordered for
08-21-76-21W5M and 09-26-75-21W5M so that the Company will be able to optimize
production from these wells upon start-up. While artificial lift has been
installed on the three current producing wells, 09-02-76-21W5M and
16-02-76-21W5M continue to free flow oil with wellhead pressures of over 870
pounds per square inch. Both 08-02-76-21W5M and 08-21-76-21W5M are exhibiting
similar wellhead pressures while shut-in. The Company anticipates that the
installation of the multi-well battery in section 02-76-21W5M will be able to
produce and deliver clean oil to market resulting in a reduction of costs and a
stabilized field netback of approximately $50.00 per barrel (or a 19% increase).
Gas and NGLs Conservation
The Company has initiated discussions with third parties to construct gas and
NGLs conservation facilities and initially include a modular 10 million cubic
feet per day gas plant, sales gas pipeline and an oil battery with water
disposal facilities. There are varying construction scenarios being
contemplated.
Bank Line of Credit
The Company is in advanced discussions to obtain a line of credit from a
reserve-based lender which the Company anticipates will be finalized shortly.
Reader Advisory Regarding Forward-Looking Statements
Estimates of reserves and resources in this news release are deemed to be
forward-looking information as they involve the implied assessment, based on
certain estimates and assumptions, that the reserves described exist in the
quantities predicted or estimated, and that the reserves described can be
profitably produced in the future.
This news release contains certain "forward-looking statements" or
"forward-looking information" (collectively referred to herein as
"forward-looking statements") within the meaning of applicable securities
legislation. Such forward-looking statements include, without limitation,
forecasts, estimates, expectations and objectives for future operations that are
subject to a number of assumptions, risks and uncertainties, many of which are
beyond the control of the Company. Forward-looking statements are statements
that are not historical facts and are generally, but not always, identified by
the words "expects", "plans", "anticipates", "believes", "intends", "estimates",
"projects", "potential" and similar expressions, or that events or conditions
"will", "would", "may", "could" or "should" occur or be achieved. This news
release contains forward-looking statements, pertaining to, among other things,
the following: estimated additional drilling locations; the timing, method,
costs and recovery from future drilling operations; infrastructure development
and the timing and effects thereof; facilities construction and equipment
installation and the cost, timing and effects thereof; approval of the Company's
application by the AER; and the Company's ability to obtain future financing and
the timing thereof. Statements regarding future production, capital expenditures
and development plans are subject to all of the risks and uncertainties normally
incident to the exploration for and development and production of oil and gas
that may cause actual results or events to differ materially from those
anticipated in such forward-looking statements. These risks include, but are not
limited to, inflation or lack of availability of goods and services,
environmental risks, drilling risks, regulatory changes and certain other known
and unknown risks detailed from time to time in High North's public disclosure
documents, copies of which are available on High North's SEDAR profile at
www.sedar.com.
Although High North believes that the material factors, expectations and
assumptions expressed in such forward-looking statements are reasonable based on
information available to it on the date such statements were made, no assurances
can be given as to future results, levels of activity and achievements and such
statements are not guarantees of future performance. High North's actual results
may differ materially from those expressed or implied in forward-looking
statements and readers should not place undue importance or reliance on the
forward-looking statements. Statements including forward-looking statements are
made as of the date they are given and except as required by applicable
securities laws, High North disclaims any intention or obligation to publically
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. The forward-looking statements
contained in this news release are expressly qualified by this cautionary
statement.
Reserves Advisory
High North's reserves estimates have been prepared and evaluated in accordance
with National Instrument 51-101 - Standards of Disclosure for Oil and Gas
Activities and the Canadian Oil and Gas Evaluation Handbook. Proved reserves are
those reserves that can be estimated with a high degree of certainty to be
recoverable. There is at least a 90% probability that the quantities actually
recovered will equal or exceed the estimated proved reserves. Probable reserves
are those additional reserves that are less certain to be recovered than proved
reserves. There is at least a 50% probability that the quantities actually
recovered will equal or exceed the sum of the estimated proved plus probable
reserves.
It should not be assumed that the estimates of future net revenues presented
herein represent the fair market value of the reserves or resources. Future net
revenue values, whether calculated without discount or using a discount rate,
are estimated values only and do not represent fair market value. There is no
assurance that the forecast prices and cost assumptions will be attained and
variances could be material. The reserve estimates provided herein are estimates
only and there is no assurance that the estimated reserves will be recovered.
Actual oil reserves may be greater than or less than the estimates provided
herein.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that
term is defined in the policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release.
FOR FURTHER INFORMATION PLEASE CONTACT:
Mr. Colin Soares
President, Chief Executive Officer and Director
Telephone: (403) 454-5565
Email: csoares@highnorthresources.com
Mr. Kyle Stevenson
Investor Relations and Director
Telephone: (604) 687-1779
Email: kstevenson@highnorthresources.com
Website: www.highnorthresources.com
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